As with every business venture, it is crucial to devote ample time and budget in
finding the right angel investor. Once a prospective angel investor or angel groups
are identified, the entrepreneur must then go through several steps to obtain their
desired capital.

Write a funding request

In order to raise any kind of capital for your business, a funding request must
be made. This is a letter that is sent to an angel investor/group describing your
need for funding and requesting a meeting to discuss your proposal. A carefully
planned request can be the difference between having an investor finance your venture
or being completely disregarded. Some prominent mistakes that many entrepreneurs
make when writing a funding request are spelling and grammatical errors, providing
too much or too little information that makes their request difficult to follow,
and creating too much hype about their business’ products and services. This
budget proposal can range anywhere from a few thousand to a few hundred thousand
dollars. A well-written, clear, and concise funding request should be submitted
for initial review, highlighting some important components:

Headline- the product or service that is being sold and the amount
that you are seeking to raise.

Full description- includes any relevant information that gives
the facts about yourself and your company, as well as what you are trying to accomplish.

Market opportunity- your targeted market/consumer base and why
your product would be successful.

Requirements- an explanation of the requirements needed to run
your business.

High points- mention some important details that may significantly
increase the value of your deal.

In the event that you initiate contact, and an angel shows interest in your investment,
it is critical to present them with a well-detailed business plan in order to successfully
raise angel capital.

The importance of a business plan

According to the United States’ Small Business Administration (SBA), 90% of
all small businesses fail within the first two years of operation. Despite these
grim statistics, the majorities of these companies either do not know how to properly
plan their businesses, are not willing to take the time out to devise a solid business
plan, or do not even know how to maintain their business plan. Even though it is
possible to succeed in a business without an effective plan, it is always wise to
create and follow one for starting any business, so that components such as daily
operations, management and employees, finances and returns are organized and focused
to promote business growth.

An outline of the SBA’s suggested business plan is as follows:

Executive summary- This part of the business plan is an overview
of your company and includes information such as the history of the business, its
mission, objectives, location, products and services sold, targeted market, value
proposition, projected growth, names of people who have a stake in the company,
risks and opportunities, and capital requirements. 

Market analysis- This includes industry-specific market research,
supply and demand of products sold, market share percentages, etc.

Company description- This refers to the nature of the business,
success factors, profitability, etc., and how these components contribute to the
overall business.

Organization and management- Ownership structure, the names of
the executives and management team and their experience, expertise and education
level, salaries and benefits should be mentioned in this section.

Marketing and sales strategies- This is the effective marketing
and advertising approach on promoting the business and selling its products and

Products and services- This refers to the competitive advantage
of your products and services, their uniqueness, the need for these products and
services, their pricings, legal issues, etc.

Prepare a proposed financial package for your angel

The entrepreneur is strongly encouraged to do research and to prepare information
for prospective angel investors about different financial packages that can be offered.
Most angels prefer equity, where they have a desired percentage in the company in
return for investing in the business and a guaranteed exit strategy (such as a mandatory
buy-out). These financial arrangements should be tailored to fit the angel’s
needs. Any proposals should be openly made and agreed upon by both parties.

Before signing any agreement, the entrepreneur must make sure that: